COVID-19 has reinforced the importance of financial partnership between retailers and landlords, said Brixmor CEO James M. Taylor Jr., who spoke with ICSC president and CEO Tom McGee yesterday for the ICSC Connect Virtual Series.
Most of the REIT’s 400 properties include essential tenants and thus have been operating throughout the pandemic. But despite the steady stream of business to most of the company’s supermarket tenants, other retailers still need help from the federal government, especially the independent businesses that make up a chunk of the company’s small-shop tenants, he said.
Access to the attractively priced liquidity the federal government can provide is critical, Taylor said. A substantial portion of the company’s tenants that qualify for the Small Business Administration’s Paycheck Protection Program, or PPP, have secured funds. “Frankly, for many of them, it has been the difference between being able to reopen their business or not,” he said. “We’re very excited to see the rollout very shortly of the Main Street Lending program.” The Federal Reserve Board’s Main Street Lending Program is a bit broader and provides even more liquidity than the PPP, he said.
“Particularly as we attract new types of tenants to our centers, we may need to think about leases in shorter terms. Maybe with that comes less capital commitment on the part of the landlord”
Brixmor is working on rent deferral programs with tenants that were forced to close stores during lockdowns. In the meantime, the company, like other landlords, is putting capital at risk that lenders and others won’t in order to keep small business tenants open and serving the public, Taylor said. “It underscores the importance of the role of shopping centers in driving the economy,” he said.
The crisis is creating camaraderie among tenants at Brixmor’s centers, Taylor said. Larger grocery tenants like Kroger and Publix have been sharing best practices for reopening stores with smaller tenants that previously might have been considered rivals. Brixmor tenants also are collaborating on curbside pickup programs now that more are offering the service.
Landlords similarly need to collaborate with tenants on leases, he added. “As landlords, we need to be open-minded. Particularly as we attract new types of tenants to our centers, we may need to think about leases in shorter terms. Maybe with that comes less capital commitment on the part of the landlord.”
Retailers already want to negotiate new pandemic clauses into their leases, he said.
It’s going to be increasingly important for the retailer to have a landlord that is truly aligned with its goals and willing to invest, he said. “Is the landlord well capitalized? Will they partner with you as you evolve your own format? Are they going to be flexible as you need to use the parking lot in a different way?”
The full ICSC Connect Virtual Series episode is available here.
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By Brannon Boswell
Executive Editor, Commerce + Communities Today